Whole Foods to further centralize buying operations and bar brand reps from store

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Dive Brief:

Whole Foods will further centralize its buying operations and bar brand representatives from marketing their products in stores, according to The Wall Street Journal. The retailer informed manufacturers of its new policies during last week’s Expo East conference.

Whole Foods was unique in allowing brand representatives in its stores. The decision to keep them out of the store is aimed at improving efficiency, according to a Whole Foods spokeswoman, but some sources interviewed by the Journal argue that certain specialty products require additional explanation and customer education.

Centralized buying, meanwhile, is aimed at improving efficiency, but some analysts and suppliers say the retailer will shed many of the niche and local products that have made the grocer unique.

Dive Insight:

Whole Foods has some of the highest operating costs in the industry, so it’s inevitable that some of the grocer’s long-held practices will get streamlined. The question is whether Whole Foods can become a more efficient grocer while still retaining its identity as a locally focused specialty player.

Allowing brand reps to promote products in-store made Whole Foods unique among mainstream grocers, and advocates say the practice helped shoppers better understand the benefits of products like charcoal body butter and chia seeds. But the presence of these reps has proven inefficient, and according to a Whole Foods spokeswoman, they tend to be distracting for store employees. Some sources interviewed by the Journal believe Whole Foods sees a revenue opportunity to provide brand advocacy and in-store education itself.

The decision to further centralize buying operations, meanwhile, could bring sweeping changes to the company. Whole Foods’ regional and store-level buying have helped it build an assortment of unique local products over the years. Relegating more of its purchasing to executives at its Austin, Texas headquarters means the retailer will likely shrink its product assortment and focus on larger, well-funded local brands. Emerging brands without access to significant capital could struggle to get on Whole Foods’ radar.

This will all help standardize operations across Whole Foods, which will result in lower prices for shoppers. But it could come at the cost of market differentiation. The company has the backing of one of the world’s most successful companies right now, but its recent moves are fashioning it into more of a traditional grocer. Will it be able to stand out without its specialty assortment? Can it lower prices enough to differentiate against Kroger, discounters and discount specialty chains like Sprouts and Lucky’s? These are crucial questions for Whole Foods and Amazon.

This seems to be an opportunity for independent specialty stores and regional players like Lunds & Bylerly and PCC Community Markets, who can pick up any local brands that leave Whole Foods or are otherwise shut out. The demand for emerging brands, after all, is still very high, with many shoppers willing to pay extra for community-focused, mission-driven products.

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